Fraud Friday: Divorce and payment not made - Spidell

Fraud Friday: Divorce and payment not made


A taxpayer had an oral agreement with her then-son-in-law to repay money she lent him; after her daughter divorced him and payment was not made, the taxpayer filed a Form 1099-C discharging $30,000. Her ex-son-in-law filed suit, claiming that the filing was fraudulent and was done only with the intent to cause him to pay extra tax. The Court of Appeals determined that the district court should have thrown out the case because the nine types of false information returns for which an injured taxpayer may recover do not include Form 1099-C. Although the taxpayer was not required to file a Form 1099-C, she was not prohibited from doing so. (Cavoto v. Hayes (February 28, 2011) U.S. Court of Appeals, Seventh Circuit, Case No. 10-2681)